The Disclosure of Replacement Cost Accounting Data and Its Effect on Transaction Volumes: A Reply.

Abstract The article presents a reply by Byung T. Ro to a comment on his paper "The Effect of the Disclosure of Replacement Cost Accounting Data on Transaction Volumes, " which was published in one of the previous issues of the periodical "The Accounting Review. " Ro says that specifically, the comment pointed about two problems regarding his paper. Firstly, the invalidity of pairing treatment and control firms with different size, and secondly, the lack of a control for noise in the volume data. Ro admitted the existence of size difference between paired firms as a potential problem. Because of the 100-million materiality standard, the size difference' problem would necessarily arise if one used firms not complying with ASR 190 as a control group in investigating the impact of ASR 190. He reveals that this fact is also recognized in the papers of accountants like J. Boatsman and K. Gheyara. He says that despite the potential problem of size difference, a matched- pair design similar to that in his study is used by, for example in the papers of Gheyara and Boatsman. Ro stated that in general, the hypothesized size difference problem could exist in cases where accounting disclosure requirements are conditional upon a materiality standard based on firm size.